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Programmatic's Growing Pains – BidSwitch

Scott Neville, GM of BidSwitch, considers the incredible growth of programmatic advertising, and the resulting problems for the entire ecosystem.

Amidst all the recent discussion around the hidden ‘ad tech tax’, and concerns about how the programmatic advertising pie is carved up, many seem to overlook the fact that the programmatic vision of real-time user targeting is reliant on a vast, complex web of technological pipes and code. The technology required to power the programmatic universe – and the cost associated with it – is expanding rapidly, and unsustainably.

BidSwitch sits in a unique position, serving as an infrastructure layer that is currently powering a global integrated network of over 350 DSP and SSP partners. A core aspect of our business includes listening to and routing real-time bid opportunities across all media channels on behalf of our partners. This vantage point allows us to see not only where and how the industry is growing, but also where the inefficiencies are being created across the ecosystem.

It is often estimated that up to 30 per cent of the overall programmatic ad budget is allocated towards technology. It is important to note that this seemingly large technology allocation typically incorporates several disparate intermediary fees. Between DSPs, SSPs, DMPs, trading desks and basically every vendor represented by the Lumascape, the programmatic food chain is long and complicated. Each and every ad tech provider’s business also carries an invisible, and hefty, operational fee. This is the cost associated with servers, bandwidth and storage – all of which are required simply to listen, process and decision relevant opportunities in real time.

As programmatic advertising continues to grow at breakneck speed, the sheer scale of media-related bid traffic is increasingly weighing down the ecosystem. Just 12 months ago, BidSwitch was translating 250bn bid requests a day. Today we’re translating more than 400bn, and climbing.

While this represents some natural evolution, as programmatic expands into new channels, a huge proportion of growth can be attributed to the adoption of header bidding and reselling, resulting in significant bid duplication. Our own internal data analysis has shown that up to half the total bid traffic processed among BidSwitch’s partners is made up of duplicated bid requests. Overall, roughly 25 per cent of the bid requests that we see worldwide are actually unique. This is in addition to the much more maligned issues of fraud and fake inventory.

Simply put, the number of bid queries processed daily vastly exceeds the number of possible ad impressions that can actually be viewed by human eyeballs. As the volume of bid traffic grows, so does the cost of managing the systems and manpower that enable it. With costs climbing disproportionately to true advertising value, profit margins are being squeezed across the board, putting huge pressure on ad tech intermediaries who have to bear this burden.

BidSwitch was born from the need to resolve exactly these kinds of problems –streamlining complex technology interactions and providing an infrastructure designed to mitigate the inefficiencies plaguing the programmatic ecosystem today. Our customers leverage BidSwitch as a central access point to plug into hundreds of supply and demand partners across all media channels and markets, saving them time, resources and technical costs.

Perhaps more importantly, however, we also serve as a central hub dedicated to programmatic transparency and efficiency. By both removing fraud and applying critical bid-stream shaping and optimisation technologies, BidSwitch is helping to negate some of the hyper-inflated ad tech tax that results from programmatic’s inefficient expansion.

The continued growth of duplicated queries and fake impressions is proof that there is still much to be done.

With many highly anticipated new features and initiatives in the works, including in-app mobile fraud detection, deals troubleshooting and ads.txt implementation to help combat reselling, BidSwitch is working hard to provide the tools needed to overcome the infrastructure scaling challenges facing the industry today. We want to ensure that the programmatic vision of real-time user targeting continues to grow, but in a true and sustainable way.